Operating Shared Services as a Business Unit – a Middle East Approach to Customer-Centric SSO
[Note: this article was first published in September 2016]
Al Tayer Group operates in 12 countries across the Middle East and manages more than 200 stores across this region on behalf of, or in partnership with, some of the world’s biggest automotive and retail brands.
Having evolved since its launch in 1979, four years ago, the Group launched a two-pronged Shared Services initiative to drive more cost effectiveness and efficiency through its HR and Finance functions.
Ehsan Shammasi currently heads the HR Shared Services division. While more effective talent management and employee services are key outputs, the initial driver for change was better cost management and transparency. To better reach this target, after the first year of implementation, the Shared Services shifted from a year-end, cost allocation strategy to a charge per transaction model. This proved a highly significant decision, and one Ehsan recommends:
"In effect, we costed out every hour and came up with a service charge model that we were able to pass on to each business unit," he explains. "The main benefit was that the Group was able to recognize and monitor trends across different business units. It also meant that the ‘urgency factor’ that accompanied many requests was clearly identified and more efficiently responded to."
What this meant was that the center evolved to a strategy whereby it charged a 100% premium for these ‘urgent’ services, over the SLA agreed cost. The increased revenue, in turn, enabled Ehsan to hire extra resources to meet the businesses’ growing demand for services.
"The real benefit for us was that it shifted our mindset from having to ask for budgets to being able to leverage our own revenue as a justification for expense," he explained.
It’s also shifted the Shared Services onto a model that operates like a business entity with its own P&L.
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Success Breeds Success
With the initial experience positive for the businesses, this year, a brand new need has emerged. Businesses have been proactively seeking value added services that don’t necessarily align within HR’s scope. The Shared Services has been quick to respond, however, and shifted to a more customer centric service culture. The result is that the SSO has broadened its scope to include many of these new bespoke services.
"We call this new evolved service stream Concierge Service, because many of the requests are bespoke. The initiative is now just 6 months old but we have created an extraordinarily good vibe around it," explains Ehsan. "It's also encouraged us to clearly identify a future state Shared Services where we are more of a profit center and operate as a stand-alone business unit."
An Emerging Opportunity: Revenue Generation
This last is an important point as the Shared Services concept is still relatively new across the Middle East region, and businesses operating there (with the exception of global multi-nationals) are still unfamiliar with the concept. But the need certainly exists.
Apart from its own captive businesses, Al Tayer Group also runs National Agencies and Joint Ventures (National Agencies apply to foreign entities wanting to establish their business in the UAE and needing a local corporate sponsor). The HR Shared Services supplies all back office services to these organizations, and the volume of service requests from these sources currently makes up 25% of the SSO’s total billed service charge. It’s an area Ehsan believes offers a lot of opportunity.
The new Concierge services are based on the professionalism and process culture that Shared Services entail, applying this expertise to new areas of demand. For example, in the UAE, employees are required to engage in regular, potentially complex and time-consuming interactions with local government when it comes to the visa sponsoring system that covers an individual and his/her relations. The SSO has been able to take over many of these processes on behalf of staff.
The business, on the other hand, has different kinds of challenges that it has been all too happy to hand over to the SS0. Al Tayer Group manages 200 retail stores across the UAE, with lots of administrative work involved in managing the commercial government relationship, for example for permits that are required for any event staged at the store. The ensuing interaction with government authorities is fairly labor-intensive and involves a complex process of submissions, payments, etc., as well as strong networking relationships. The SSO is able to leverage its connections and expertise, as well as process excellence, to take over this administrative work.
Driving a Cost-Competitive Solution
When the service charge was introduced, shining a spotlight on individual transactions that HR provided, there was initially pushback from the businesses. "The feeling was: why should we have to pay for things like onboarding? Surely it's your job to do this for us?" explains Ehsan.
"We were able to show them some benchmarking that we had done with other local companies, however, and also compare the cost of going outside the business versus the cost of us providing these services in-house. At every stage our in-house services are less costly," he says.
This lower cost is partly subsidized by the service charges the SSO bills through optimizing its existing capacity in delivering services to external clients. It's an area that Ehsan believes could grow substantially and provide additional investment monies for his team.
"Right now the external clients and the value add services represent 25% of our total SSO HR billed service charges. Much of this acts as an indirect subsidy to our captive business services," he explains. "I think it’s a growing opportunity here in the Middle East".
Leveraging the Right Talent in the Region
One of the challenges SSO leaders are faced with, according to Ehsan, is that Shared Services is still in its infancy stage and widely interpreted as transactional, low paying work.
"Most people still see Shared Services as administrative and processing-oriented," complains Ehsan, "whereas it should really be the other way around. Shared Services offers stepping stones towards a career that is increasingly pointed toward Centers of specialization."
One of the advantages of being at the early stage of Shared Services adoption, however, is that most companies are still recruiting internally, where there is plenty of supply. "The real challenge is in recruiting for leadership roles, where we simply don't have enough experienced talent with an understanding of the local market," explains Ehsan.
The scarcity of shared services talent within the Middle East remains a key challenge for organizations that are at the start up phase of their SSO. "We will need more time to evolve and nurture world class talent in our region", Ehsan says.
"Lots of the processes that we deal with are not necessarily around systems but are about networking and connectivity with different government authorities and ministries. If you don't have those connections or relationships your ability to get things done will at best be limited," explains Ehsan. "In recruiting for a new position, ideally you would find someone from the region, who has worked themselves up within their business. The supply of people who fit that category is still limited, because their organizations are keen to hold onto them."
While recruiting nationals may create some pressure on SSOs due to the higher pay ratio that applies to them, there is still good potential within the region to nurture nationals and attract them to career opportunities in shared services. Bahrain and Oman are two regional hubs for some organizations’ call centers, which operate mainly with a national work force that is well trained and highly effective.
One other clarification: While many businesses operating across the Emirates are required to comply with strict hiring ratios for national employees – which can limit the freedom to hire for "best fit" – the percentage applies to the Group, not the department, so where specialist skills need to be hired in from other countries or regions, this is still possible, explains Ehsan.